EU uncertainty could cause charity headache

11th June 2014

Simon Mackintosh at the Scotsman independence breakfast

Scottish charities, and those from the rest of the UK with operations north of the border, may face a significant challenge if there's a Yes vote in September and an independent Scotland finds itself outside the European Union, or on the inside with the rest of the UK voting to leave the bloc, according to Turcan Connell charities specialist Simon Mackintosh.

EU rules at present mean member states must treat a charity from another member nation as they would one from their own country if the foreign organisation meets its own domestic charity tests, Simon said at a breakfast meeting organised by the Scotsman newspaper in conjunction with Turcan Connell. This allows German taxpayers to make a donation to a Portuguese charity in the same way they would to a German one. Similarly, an Italian charity with investment property in Germany should enjoy the same tax relief as a German one.

Should an independent Scotland and the rest of the UK both stay in the EU, these protections will go some way to helping our charity sector overcome the difficulties of navigating separate tax and regulatory systems. If, however, Scotland is blocked from joining the EU. or those in the rest of the UK opt to leave the grouping in 2017, British charities on both sides of the border and their supporters may find they have no absolute right to the tax-relief opportunities in the neighbouring state.

Even with a No vote, the charity sector still faces a lack of clarity over tax relief because of impending changes in the way money is raised north of the border – the separate Scottish rate of income tax due to come into existence in 2016 poses the question of whether taxpayers in one part of the UK would continue to get full tax relief on donations to charities in other parts of the country.

Simon also spoke on charities' ability to enter the independence debate as well as the currency issues charities may face after a Yes vote – some with cross-border commitments or funding services may need to consider currency hedging too cover risks, should Scotland be unable to stay in a sterling zone - as well as their ability to enter into the independence debate.